Court Rules Shareholders May Be Sued In De Facto Dissolution

California Corporations Code Section 2011 provides that causes of action against a dissolved corporation, whether arising before or after dissolution, may be enforced against its shareholders if any of the assets of the corporation have been distributed to the shareholders. Enforcement is limited to the extent of the shareholders’ pro rata share of the claim or to

Are Delaware Directors Deathless?


I’ve noticed that the drafters of corporate laws seemed to have overlooked the mortality of directors.  Section 141(b) of the Delaware General Corporation Law, for example, prescribes the term of directors as follows: Each director shall hold office until such director’s successor is elected and qualified or until such director’s earlier resignation or removal. Nevada

California’s Bizarre Voting Records Disclosure Requirement

Some statutes are so poorly drafted that one hardly knows where to begin.  One such statute is Section 711 of the California Corporations Code.  According to the legislature, the purpose of the statute is “to serve the public interest by ensuring that voting records are maintained and disclosed as provided in this section [Section 711]”. 

Is The SEC Confused About Who Solicits Proxies?

In reviewing some recent proxy bylaw provisions, I noted that some refer specifically to solicitations “by the Board of Directors”.  See, for example, this bylaw provision recently adopted by Monsanto Company.  This reference to solicitations by the Board of Directors makes some sense in light of the instruction in SEC Rule 14a-4(a) that the form of

Should Directors Be Required To Have Valid Passports?

Lately, I’ve had occasion to think about director qualifications.  Section 212(b)(4) of the California Corporations Code permits the bylaws to to specify the qualifications of directors.  In Section 141(b),the Delaware General Corporation Law similarly authorizes the certificate of incorporation or bylaws to prescribe director qualifications.  Qualifications should be appropriate to the corporation’s business and purpose.

No Pay Bylaws Fall Short Of Ending Forced Subsidization

In this post published yesterday on The Harvard Law School Forum on Corporate Governance and Financial Regulation, Delaware lawyer A. Thompson Bayliss and Mark Mixon write that no pay provisions “could transform stockholder litigation without the effects that make ‘loser pays’ provisions unpalatable to many”.  According to the authors, a no pay provision requires that each side pay

Stock Repurchases: “We Can’t Think Of Anything Better To Do With Your Money”

The Wall Street Journal took aim yesterday at stock repurchases and dividend payments, citing a commissioned study that concluded: “companies in the S&P 500 index sharply increased their spending on dividends and buybacks to a median 36% of operating cash flow in 2013, from 18% in 2003.  Over that same decade, those companies cut spending on plants

Does Mandated Unbundling Deprive Stockholders The Right To Vote On The Whole?

A forthcoming academic paper looks for bundling in more than 1,500 management proposals between 2003 and 2012.  Bundling occurs when multiple matters are combined into a single proposal.  The authors, James Cox, Fabrizio Ferri, Colleen Honigsberg, and Randall Thomas, conclude that bundling occurs far more frequently than had been suggested by prior studies.  They recommend that the Securities

SB 75 May Prove To Be Delaware’s Seven Sisters

A century ago, New Jersey was the state in which to incorporate.  Long before former Iraqi President popularized the expression “Mother of Battles” (“Um El-Ma’arek“), the famed legal scholar Adolph A. Berle, Jr. bestowed the title of “mother of all corporations” on the State of New Jersey.  Berle, Historical Inheritance of American Corporations, Lecture given before The